CMC CEO says board chairman was replaced due to fraud, conflict of interest

Motor dealer CMC Group says board changes that saw Joel Kibe replace Peter Muthoka as chairman of the company were made to address conflict of interest and fraud concerns at the company.

According to CMC Group Chief Executive Officer, Mr Bill Lay, the suspicions of fraud emerged from an audit done on operations of the company. (See CMC shares rise on news of changes in boardroom)

“The study revealed how Andy Freight Forwarders Services overcharged CMC for logistics services. As CEO of Andy Freight Forwarders Services which is the largest supplier of services to CMC, the board felt that Mr Muthoka had a significant conflict of interest,” reads CMC’s statement sent to newsrooms on Wednesday.

Mr Lay said that from the audit report, Andy Freight Forwarders overcharged CMC by between Sh300million to Sh500million per year, adding that in some instances, the overcharge ranged from 10 to 100 times the market rate for specific services.

The CEO said CMC is going through a transformation process which will critically look at all areas of management including procurement of goods and services.
The company also plans to initiate recovery process of between Sh1.5 to Sh2billion suspected to be lost in the past five years due to the alleged overcharging by the company associated with the outgoing chairman.